What is Ichimoku Kinko Hyo?

The full name should be Ichimoku Kinko Hyu. In short, I call it Ichimoku.

It is essentially a trend trading system developed by a Japanese newspaper man called Goichi Hosada with the help of many other students to fine tuned the formula.

With Ichimoku, I found that I am able to quickly developed a big picture understanding of the underlying security. Rather than looking at indicators and moving averages separately, Ichimoku encourage one to have a ‘macro’ view of what’s going on. From there, we can decide if we want to short, long, or even sidestep security.

What makes up Ichimoku ?

Ichimoku is make up of 5 indicators.

Tenkan sen

Kijun sen

Chikou span

Senkou Span A

Senkou Span B

Tenkan sen (a.k.a ‘turning line’) or the short ‘moving average’

Unlike typical simple moving average, where the day’s closing price is taken and calculated, Tenkan sen is calculated as Â (HIGHEST HIGH + LOWEST LOW)/2 for the past 9 periods

The angle of the Tenkan sen can be used to suggest the strength of the momentum. If it is a steep line, we can say that the underlying has a change in momentum and is very strong. Look at Palm’s chart below. See how Tenkan sen change when Palm Pre is announced.

This is the longer timeframe line and is less sensitive to current price changes. However, it is a key indicator for major change in trends.

Chikou Span (the “lagging line”)

This is shown on the chart as a lagging line behind the price. In the chart below, it is the green line and it is calculated as CURRENT CLOSING PRICE time-shifted backwards (into the past) 26 periods.

Chikou Span is one of the unique feature of Ichimoku. And this is the line that I used to determine theÂ support and resistant Â levels.

Why is Chikou Span shifted 26 periods back? The answer becomes clear once you understand that a change in trend is a relative state. For example, if the trend is up and it continues to goes up, then there is not change in trend. By shifting it bacwards 26 period, we can compare the current price level to how it looks like 26 periods ago.

With a glance of the position of the current price level and Chikou Span, we can quickly identify if the trend is changing and is it going to break through any possible support or resistant levels.

Some rules:

If current close price is lower than that of Chikou Span at 26 periods ago, then we can safely say that the likelihood of more bearish price action to go and vice versa.

If Chikou Span cuts through the price line with no kumo resistant in sight, we can assume that the trend is bullish.

If Chikou Span cuts through the price line with kumo resistant ahead, we can expect resistant levels.

<<work in progress>>

10 thoughts on “What is Ichimoku Kinko Hyo?”

http://www.stockcharts subscriber. Ichimoku is available.
Know little about it, they sell a book, not well reviewed on Amazon.
I like Ichimoku as it gives a good sense of whats going on at a glance.
See u use stochastics to time.

Hi Sir
I am totally new to trading and currently just baby steps in learning
I came across you web site and I am truly interested to learn this Japanese system of trading
For a start, what trading platform can we use to get the Ichimoku tools?
If convenient, do drop me an email.
Many thanx and hope you have a profitable trading week

Thanks for the reply bro. already your explanation on the cycle has given me some ideas to think about.

I do think grasping the time cycle will be very empowering and allows me to know precisely a better exit. I do note you’re working on enter and exit strategy in your blog and i look forward to reading it.

i also realized you had at one time traded on the Sgx and i’m curious as to why any seasoned trader would be interested in that sunny island exchange. Are you by any chance from sg as well?